Kathie Bracy's Blog

A forum for Ohio educators, sharing thoughts regarding their health care and pension system (STRS Ohio). Researcher John Curry manages a clearinghouse of related e-mails, articles, announcements, etc. His daily mailings include many items that do not make it to this blog. Contact John (curryfeezer@yahoo.com) if you wish to be on his e-mail list. Kathie Bracy: kbb47@aol.com.

Sen. Schuring feels January is probably the earliest any serious discussion will begin concerning the STRS recommendations presented to the ORSC. He further stated that this will not be an easy task as legislation must be drawn-up to address these issues and that will take a long time. Drafting legislation that will pass in the house and senate is no easy task. Such legislation is always highly sensitive and critical.

Another issue slowing down the process is that the even years are all about re-election. The Governor, half of the Senate and all of the house will be up for election in 2010. That means there will be very few session days.

Senator Schuring promises to protect retirees. He feels there is already a great many rumors out there and to not overreact to them. He indicated that he would be our contact person and welcomed me to contact him anytime.

We will continue to meet and discuss the many issues that have brought this situation about.

Girard Miller is a senior strategist for retirement plans and investments at the PFM Group, and has 30 years of experience in the public, private and nonprofit sectors. Questions, success stories or anecdotes about benefit issues in government? E-mail him at millerg@pfm.com.

Our nation's public pension and retiree medical benefits plans are facing a financial crisis unseen in this generation. Stock market losses in 2008 have reduced the funding ratios of the pension funds from 85 percent to about 70 percent. The remaining time to return them to full funding before baby boomers retire is getting shorter by the day. Retiree medical plans (known as OPEB for "other post-employment benefits") are in worse condition, almost entirely unfunded, because nobody ever bothered to set them up right in the first place. In many states, the cost of proper funding will be a 30 percent to 50 percent increase in pension and OPEB contributions in the next three years. In several states, the annual tab will double — at least.

Regardless of political ideology, most public policymakers agree that, given the current financial squeeze, something needs to change. Typically, those who seek to reform these systems begin with new employees, because they are invisible. Over the coming decades, younger workers are likely to receive lower benefits than current employees. But what about incumbent employees? Shouldn't they share some of the load?

Here it gets tricky for public managers. The law is pretty clear in most states: You can't reduce pension benefits of retirees. And in most states, a similar rule applies to the previously earned benefits of incumbent employees: They are entitled to what they have already earned for past service. It's a property right, especially for those who have achieved vesting status. But with respect to their future work and the compensation employees receive for their services in 2010 and later, there are vast interstate and ideological differences of opinion about legal rights as well as basic principles of fairness.

It gets even murkier when the focus shifts from pensions (which sometimes are constitutionally protected) to OPEB retiree medical benefits, which some states view as "subject to appropriation" — which means that elected officials could change their minds any time in the future, at least in theory. In fact, over half of the states have never bothered to create the legal structures necessary to properly fund retiree medical benefits, which adds to the argument of those who suggest that these benefits could be discontinued by an act of the employer and certainly could be discontinued with respect to unvested employees.

How can benefits be guaranteed by a previous legislature that never even bothered to set up a trust fund requirement to back up its promises? If a court were to hold that the legislature mandated those unfunded benefits for incumbents as a matter of law, but failed to provide the essential trust funding mechanism necessary to assure proper financing, then local governments should be able to sue the state for the unfunded mandate and a defect of statutory design.

Public managers now face a true dilemma as they seek to reduce retirement plan costs. If they only change the benefits plan for new employees, they produce very slim cost reductions in the next five years. Until these "new" employees become a significant portion of the workforce and aging baby boomers head off to pasture, the actuarial reductions will be minor in comparison to the swelling costs of providing current benefits to incumbent employees. But changing benefits for older workers — even for their future service — is a hot potato. In some states, the attorney general has ruled that it's off limits. The theory is that the benefits plan was part of the original wage bargain, sort of a social compact in the spirit of Rousseau and Hobbes. And at the very least, it is almost impossible to cut back benefits that are covered by a union contract until that contract expires.

So, what are the options for public managers and elected leaders seeking to rebalance their budgets and their governments' long-term capacity to pay benefits for retirement? The path of least resistance in many cases will be to bargain for or impose higher employee contributions. This strategy leaves the benefits for incumbents intact, but requires them to pay a fair share of the costs. I've written before about this strategy in a prior column and won't belabor the details here. Many would argue that this is actually the fairest solution because older workers typically earn more and will make greater contributions for benefits that they now value the most. A case could be made for age-based contribution rates that impose a higher percentage rate on older workers than younger workers, to reflect more accurately the higher value of their retirement benefits as they approach the age of eligibility. Actuaries can confirm that the cost and value of a defined benefit rise exponentially as retirement approaches, so age-based rates would align the senior employees' contributions with the increasing value of their higher benefit as it accrues in their later years.

If employees are unwilling to pay an increased share of the benefits, however, there is only one other way to balance the books actuarially without busting the budget: Change the earnings formula for work to be done in the future. Before heading down this path, however, public managers must brace for legal challenges and would be wise to first understand their state's constitutional and statutory environment with respect to retirement benefits for public employees. Then there is the issue of negotiating a benefits reduction for older workers when the union representatives usually are (you guessed it!) older workers. Then add to the mix the problem in many public agencies that the managerial people on the employer's bargaining team representing taxpayer concerns are (you guessed it!) older workers who would themselves have to eat whatever they cook at the bargaining table. So there are conflicts of perspective and even conflicts of interest to overcome.

Elected officials must take the lead here. I see countless examples of diligent, conscientious public finance professionals who already see the handwriting on the fiscal wall and try to present a rational case for plan reforms to elected officials — who want to simply wish away the problem by procrastinating. It's easier for politicians to pass the buck to the next generation. But in this case, the imminent rising costs of retirement benefits are about to hit the operating budget with hurricane-force winds during the terms of today's newly elected leaders. So it's time for some serious study sessions to discuss the options, understand the laws which apply and set strategy. Every newly elected official's orientation session should include a 20-minute introduction to the imminent retirement finance problems they face during their careers in public service.

One thing I can predict with certainty: Employers who fail to bill incumbent employees for part of the cost of their retiree medical plans before 2012 will regret their delays. That's because the U.S. Congress will inevitably raise the Medicare tax, as I have explained in a prior column.

Failure to act on the benefits and contributions of baby boom workers will allow tens of thousands of near-retirees to enjoy a free ride at the expense of future taxpayers and future employees. That's an outright slap in the face of intergenerational equity — and another burden we will leave to our grandchildren. If ever there were a time to take the proverbial bull by the horns, it would be now

Is the Treasurer now stopping our emails?? You never answered if the Treasurer was going to interview Dr. Hall. A simple credential answer does not suffice. That is what was used for Dr. Leone. Dr. Hall is well versed and practiced in market trends, business cycles, economics and investments. He is a published author on those subjects. Is Craig Brooks or Regina Burch? We need more explanation and openness in willing and capable candidates.

Would you be so kind as to get my message (below) to Mr. Boyce? I tried repeatedly to get it to him via his website (http://www.kevinboyce.com), but it wouldn't go through. Someone else tried his e-mail address (treasurer@tos.ohio.gov), but that got bounced back. If you could tell me what address I should use, I would appreciate it very much.

Thank you.

Kathie Bracy

-----

Dear Mr. Boyce,

As an STRS retiree, I am strongly urging you to consider appointing Prof. Tom Hall of Miami University to the STRS Board. For three years we have been stuck with a 10-member Board instead of the legally mandated eleven. We need that 11th member BADLY.

Tom Hall is highly qualified and willing to serve. Please give serious thought to appointing him. If he is not your choice, then I urge you to please work as hard as you can to appoint as soon as possible some other highly qualified individual who has a sincere interest in the plight of retirees and STRS issues.

Many retirees are depending on you; this has gone on too long (since before you took office), and people are hurting. Any help you can give us will be greatly appreciated.

RH Jones: Urge our state treasurer to appoint Tom Hall to STRS Board

From RH Jones, October 2, 2009Subject: Want to contact the Ohio Treasurer and urge him to appoint the STRS Board member that he is dragging his feet on?

To all Retired STRS Members:

Please contact the OH Treasurer to do the job we are paying him to do: appoint a highly qualified individual to the STRS Board. Tom Hall is the person best qualified to do that job. And he is willing to accept the responsibility.

This is a correction to my previous post resulting from reader feedback.The information corrected is in italics near the bottom.

The following has been written in response to the questions and comments I have received due to promoting a larger percentage of Treasury Bonds in the STRS asset allocation. It has been overly simplified to provide a basic understanding for those that have none.

Be aware that using Treasury Bonds as diversificationin a portfolio requires substantial effort, especially if traded short term on the secondary markets, and becomes substantially more complex than described below.While reading the following, please keep in mind that supply and demand also effect the price fluctuation on the secondary market.

Most inexperienced investors know that the purchase of a Treasury Bond will pay the indicated interest rate until it matures.

However, the inexperienced investor is not usually aware or very knowledgeable with respect to the trading ofTreasury Bonds on a secondary market and that their price fluctuates according to interest rates and demand.

For example, in early 2008, the interest rate for a 30 year Treasury Bond was approximately 4.50%.

The par value of the bond would have been $100.

Therefore, the purchaser would receive $4.50 per year on each $100 unit until maturity.

Bear in mind, that $4.50 is received no matter how future interest rates are adjusted.If interest rates go up to 6%, $4.50 is still received.If interest rates go down to 2%, $4.50 is still received.

On the secondary market where one could buy and sell Treasury Bonds, the price of a given bond is adjusted to reflect current interest rates according to its ORIGINAL CASH YIELD.

The price of the bond purchased at $100 yielding 4.5% will go up if the interest rates go down.It will go up so that the new interest rate matches the $4.50 that is received until maturity.

Therefore, after the September of 2008 CRASH, interest rates on the 30 year Treasury Bond fell to as low as 2.8%

If you sold your 4.5% yielding bond when the interest rate was 2.8%, the price would have reflected that you receive $4.50 in cash and would be adjusted so that the buyer would be receiving 2.8%.

Because it continues to pay $4.50 per $100, that would put the purchase price of the 4.50% bond mathematically at approximately $160.$160 times 2.8% equals $4.48

However, that premium of $60 would have to be distributed over the time period that it would take the bond to mature, and the actual selling price would be more in the neighborhood of $130-$135.

That would produce a profit of at least 30% while collecting a 4.5% return.

TREASURY BONDS NOT ONLY FUNCTION AS A SAFETY FACTOR, but will often appreciate to OFFSET LOSSES in RISK EQUITIES!

Thursday, October 01, 2009

Mario Iacone: TREAURY BONDS WILL STOP THE SLIDE

From Mario Iacone, October 1, 2009

Received the following comment with respect to the Treasury Bond Post.

“you did not indicate the decline in market value (depreciation) of the Treasury bond in your rise in interest rates to 6% example. Your readers probably need to know the market value of Treasury bonds can go both up and down”

I wish to clarify and elaborate.

A long term commitment was assumed although they can be traded short term to enhance the overall yield and take substantial profits.

Such would require building a ladder of bonds with additional purchases as rates go up.Assume a purchase at the rate of 4.5%.

Further assume that interest rates would begin to rise and continue to rise.For the sake of example, let’s assume rates rise to 6%.

One method of building a long term commitment would be to add to your bond purchases in equal amounts as rates rise.Purchase at 5%, 5.5%, and 6%.

Bear in mind, that the value of the original purchase at 4.5% has gone down because interest rates have gone up.But, with a long term approach, it would not be necessary to sell at a loss.The worst case scenario would be that you hold the bond until maturity when you will receive your original investment amount and received a return of 4.5% until that maturity date.

However, Treasury Bond rates have cycled on an average of 12 years.Remember, interest rates rose to 6%.When they come back down, say 4%, the value of that 4.5% bond will appreciate above your original purchase price.Should you choose to sell, a profit will be made on your original purchase price in addition to the 4.5% return while you held it.

Meanwhile, when the interest rate falls to 4%, the purchases made at 5%, 5.5%, and 6% would have gone up significantly in value because their interest rates are higher than the current rate of 4%.

WHAT’S MY POINT?

A consistent long term approach to Treasury Bonds can produce lucrative returns.

AND,

TREASURY BONDS NOT ONLY FUNCTION AS A SAFETY FACTOR, to STABILIZE ASSET ALLOCATION, but will also provide good returns and appreciate to OFFSET LOSSES in RISK EQUITIES!

A comment from Rich: Where are the unions?

From Rich DeColibus, September 30, 2009Subject: Re: An Open Letter to Bob Stein

Thank you for your kind words and most of all, thank you for being a voice for retirees. Where would we be without you and the blog? Simmering in frustrating isolation. You've become a mover and a shaker far exceeding any other single retiree. My best guess is a lot of active members are tuning in, too; the smarter ones realize it's their future up for grabs as much as ours. I don't know what more we can do to get the OEA and the OFT to the table...it's like they don't exist anymore. Believe me, if I was coughing up $500 a year to some organization, I'd like to know what they're doing for me, and in the case of the OEA/OFT it doesn't seem like much, at least as far as STRS is concerned.

Rich is a Cleveland retiree, past president (16 years) of the Cleveland Teachers Union.[Thanks for the compliment, though I wasn't "fishing" for that. KBB]

Wednesday, September 30, 2009

STRS Flashback - 6 Years Ago - A healthcare promise that was never kept!

From John Curry, September 30, 2009

As you read this flashback you will notice some names in boldface. All of the names below in boldface were subsequently charged and convicted of Ohio ethics violations relating to their actions while being a board member of STRS. By a law enacted since 2003 (Ohio's Pension Reform Law), none of them can ever legally run again for the STRS board because of those convictions. Some people will conveniently and selectively forget this....I won't...and neither will I forget the Billirakis plea, "Help us get the legislature to find a solution to the health-care problem."

Talk is (was) cheap, action is (was) hard to come by! The legislature had 6 years and still hasn't acted, have they?

HB 315 was introduced in the last legislature (127th) and gathered dust until that session ended. Will any legislator have the political courage to introduce another version of it during the current session of the Ohio Legislature? I think you know the answer to that one, don't you?

John

P.S. A link to HB 315 is included at the end of Kostyu's article below.

COLUMBUS — At another monthly meeting of the State Teachers Retirement System board, retirees, including some from Stark County, blasted their representatives for not doing a better job of protecting their health-care benefits.

Board member Mike Billirakis had enough.

He said critics had participated in “revisionist history” by ignoring what has been done. He said his sole purpose for being on the board is to find a long-term solution to the retirement system’s problems with providing health-care benefits to Ohio’s retired educators. He promised to resign once the solution is found.

“This board has spent 2-1/2 years trying to maintain the benefits and improve it,” he said.

Health care changes made by the board in May, which go into effect in January, will mean “thousands of retirees will have reduced benefits,” he said at Friday’s board meeting. “That’s wrong. But it’s financially based on the laws that govern us. We have no other option.”

Billirakis then told the overflow audience that instead of fighting with the board, they should help it.

“I implore you,” he said. “Help us get the Legislature to find a solution to the health-care problem. The board can’t change without you. The (STRS) staff can’t change without you.

There’s plenty of time for recriminations, but can we do that after we solve health care?”

Interim Director Damon Asbury said it is “incumbent on us to work” together to find a health-care solution.

“The pension system is solvent,” he said. “Checks are being sent. Health claims are being covered. Pension benefits without health care in today’s world is not sufficient.”

Outgoing Chairwoman Deborah Scott instructed the retirement system’s staff to find a better way to communicate with members. “Make it happen,” she said.

Scott gave an emotional farewell address, though she remains on the board. Eugene Norris of Columbus was elected chairman. Joe Endry of Westerville was elected vice chairman after Billirakis and Jack Chapman declined to move into that position.

A popular U.S. newspaper (USA Today) gives its opinion of the "Medicare advantage" that isn't!

From John Curry, September 30, 2009

...this editorial comes from a "conservative" newspaper - USA Today. USA Today is #1 in daily circulation rates at over 2 million copies per day. Now, maybe the public will wake up to the giant rip-off that Medicare advantage programs really are!

Our view on paying for health reform (Part II): How Medicare Advantage turned into a boondoggle Private medical insurers couldn’t compete, so now they get a subsidy.The private form of Medicare known as Medicare Advantage is enormously popular with seniors, and no wonder. Private Medicare plans offer extras such as vision care, dental benefits and even health club memberships that may cost more or not be available at all in the traditional fee-for-service Medicare that most seniors use.

It's hardly surprising that almost a quarter of Medicare's 45 million beneficiaries have signed up. It's a sweet deal, underwritten by working Americans who subsidize those gold-plated private plans. Taxpayers help pay an additional $1,138 per beneficiary every year above the cost of fee-for-service Medicare to give Medicare Advantage beneficiaries all those extras. Even Medicare beneficiaries themselves kick in — they pay about $43 a year in additional premiums to help subsidize Medicare Advantage members.

It gets worse. The inflated costs of Medicare Advantage are hastening the bankruptcy of the overall Medicare system by an estimated year and a half. Worst of all: Private Medicare was originally sold as a way to use the efficiency of private business to provide better service and add benefits more cheaply than the government could. Some Medicare HMOs do that, but many private plans don't. Overall, private Medicare plans cost an indefensible 14% more than traditional Medicare.

Bottom line? Like it or not — and at the outset we were optimists about Advantage — its promise has failed. Far from improving Medicare, it has turned into a wasteful taxpayer handout to uncompetitive insurers. Enjoying the largesse are companies such as Humana, for which Medicare Advantage is a profitable and growing enterprise. We asked both Humana and the industry's trade organization, America's Health Insurance Plans, to defend this system in an opposing view. They declined.If there's anything in the medical system that's ripe for cutbacks, it's the wasteful subsidies in Medicare Advantage, which is projected to spend some $1.6 trillion over the next 10 years. A subsidy phase-down being considered in the Senate would save about $113 billion. That tiny fraction of the total would pay more than 10% of the cost of health reform.

But the iron rule of government benefits is that once they're handed out, they're difficult or impossible to take away, no matter how wasteful or unjustified they are. That's what's happening here. Seniors, stirred up by Republicans who want to block health reform and by insurance companies intent on keeping their subsidies, are complaining bitterly about losing benefits.

President Obama didn't help by promising that people who like their health coverage can keep it. That's not the case for Medicare Advantage, where Obama favors trimming subsidies. While the most efficient plans would survive, some uncompetitive plans would go out of business, and others would have to drop benefits or charge more.

And that's as it should be. Seniors deserve to have options, but with Medicare going broke, those who want extras should bear the cost themselves. Cutting wasteful subsidies is exactly the right way to help pay for overhauling the health care system. If private companies can out-compete government-run health care, let them do it — without taxpayer handouts.

This is the second of two editorials on leading proposals to finance health care reform. Read the first one at blogs.usatoday.com/oped.

Tuesday, September 29, 2009

Rich DeColibus: An Open Letter to Bob Stein

From Rich DeColibus, September 29, 2009Subject: An Open Letter to Bob Stein

Dear Mr. Stein,

In case you have been unavoidedly distracted elsewhere, most retirees who follow the STRS follies (regrettably few) are less than pleased by your recent vote to shell out $3.4 million in bonuses to employees for doing what they are already salaried to do (and, to be sure, very nicely salaried). Imagine our surprise, given you wereprimarily elected to advocate for the elimination of the PBI. Not to unfairly tar you with your own brush, but here is the quote from your campaign web site:

"I would have voted to eliminate the current PBI plan but I would also seek to eliminate the process that created it in the first place. The current plan was ill-conceived and the board should have known as much at first reading." Gosh, that seems clear enough: the PBI program stinks like road kill and the board members are stupid for voting for it. Of course everyone is entitled to change their mind; it's just that if you say one thing begging to get elected, and then do the exact opposite after winning, people tend to never believe anything you say, ever again. I think the issue is called "Trust." Why do you think we voted for you?

In a recent letter to one of the members, you state:

"The processes that created a 2009 plan that was apparently not well enough understood by the membership have not been completely addressed -- but those processes were not part of the PBI motion. The misunderstanding about the 2009 PBI plan also might be as simple as a collection of oversights by the membership -- not realizing that the stock market could go down or that STRS had exposure in that area."

First of all, if you can find me one member who doesn't understand the stock market sometimes goes up and sometimes goes down, I would be truly astounded. Most of us didn't graduate from college with degrees in basketweaving. Secondly, allow me to clarify your thinking: the major problem of the PBI program has nothing to do with the process that created it, the problem is the program exists at all. So there is no misunderstanding on your part, allow me to state, with as much crystal-clear intent as I can muster, what we want: WE WANT THE PROGRAM ELIMINATED. If there is some uncertainty in your mind about the specific meaning here, get back to me and I will clarify the clarification. There is no conceivable reason to pay grossly inflated bonuses to already overpaid investment counselors, whether the market goes up or whether the market goes down. They have a job to do, they get a salary to do it, and if that's not enough for them, they are free to seek employment someplace else. That is how you and I worked most of our lives, and if that's good enough for us, it's good enough for them. We founded this country on the idea that an elite class of "betters" was a bad idea. It does not matter to us if you are always outvoted; we will eliminate the PBI-lovers slowly but surely over time. To reiterate, it's one of the reasons you're on the Board now.

As for the nonsense of, "Oh my god, they could sue us!" the fact of the matter is anybody can sue anyone at any time for any reason. If STRS lost a similar case, they must have been using ten-dollar-an-hour attorneys from lawyers-r-us on defense. The root of the problem is the PBI program exists; the board created the "they could sue us" problem in the first place by allowing the program to exist. No program, no suit. See, simple. It is utterly disingenuous to create a bonus program and then continue it on the excuse "They could sue us if we don't continue it." Hello. It states in no uncertain terms in the program itself that the board can eliminate the program at any time for any reason, or no reason at all. Geez, is there something in the drinking water down there that robs people of their sanity?

Dissemble all you want, as far as I am concerned you voted to throw 3.4 million bucks of my money down the drain for as much good as it will do me or STRS. You need not respond, and I'm a forgiving person, so this is only strike one; you get one more freebie, and then your third bad vote is strike three. However, you've got almost four years to go, so use your freebie carefully.

John Curry and Ann Hanning re: Healthcare costs

From John Curry, September 29, 2009Subject: Re: Ann...would you please pass this on to your Western Area Vice President, Karen Butt

Ann,

Thank you for your reply. I am happy to see that you do state, in your letter below, that "health care costs are high" for STRS retirees. Thank you for recognizing that. For your ORTA Western Area Vice President to say that they are "affordable" really stretches the truth. Currently, OPERS (had I spent 30 years paying into their retirement system instead of STRS) rates for my spouse and myself would be less than $100 per month total rather than what STRS wants ($967 per month) or ...more than nine times the OPERS rate. OPERS "grandfathered" their spouses' spousal subsidy, STRS didn't...they cut off the spousal subsidy overnight. How was OPERS able to do that and continue doing that when STRS wasn't?

Currently, under OPERS, the employer pays out 7% of the employer's contribution into the "healthcare pot" whereas STRS employers only pay 1% into the healthcare pot (see the ORSC table below). Yes, I realize that all five pension plans are supposed to provide corrective action should they not meet the 30 year unfunded liability by submitting their plans for corrective action to the Ohio Retirement Study Council. OPERS planned ahead while STRS didn't. In past "good investment return years" (while the unfunded 30 year mandate was also on the books) STRS dropped their employer healthcare contribution rate and took some of that money to pay for the 35 year/88% pension payout while none of the other pension systems were that generous.. no other Ohio public retirement system pays higher than 77% for 35 years. This was accomplished by these systems so as to allow for healthy hc insurance subsidies for both retiree and spouse...while STRS kept on with the 35 year/88% payout mentality. It was by that same foresight that the other plans were are still able to offer much more "affordable" (translated = subsidized) spousal rates. It was that foresight that separates the other plans from STRS.

To those current retirees that you related , "When I mention the high cost of STRS spousal cost of STRS spousal HC, some single benefit recipients (single, divorced & widowed) remind me that they do not want their rates & costs increased to provide less expensive HC for me & other non-career teachers," I can only say, 'did you tell them how OPERS managed to avoid this situation by not dropping their employer contribution rates nor imposing the 35 year/88% rule when the times were good?' It didn't have to be done that way....STRS still did it....the other systems didn't.

I borrowed part of a table from the ORSC website which shows that while STRS is busy paying out 88% (and,by comparison, OPERS only 77% for 35 years) the monies that OPERS doesn't pay out for their 35 year people allows OPERS to remain closer to their 30 year unfunded mandate that is imposed by the ORSC while still funding, and offering, affordable retiree and spousal health insurance rates:

Ohio Retirement System Percentage of Employer Contribution Allocated to Health Care in 2009

PERS 7.00%*STRS 1.00%SERS 4.16%**OP&F 6.75%HPRS 5.50%

*This amount will be reviewed by the board and may be revised during the first quarter of2009.**Does not include employer health care surcharge of up to 1.5% of total active member payroll.

Why is the current 1% STRS employer health contribution rate a measly 1% and the others so much higher? This allows STRS to fund the 35 year/88% payout that OPERS and the other three systems didn't offer and still don't offer. The 35year/88% payout is nice but STRS couldn't afford it and still (more than ever) can't afford it while offering affordable hc insurance rates for BOTH retiree and spouse. This lack of consideration and foresight by STRS for BOTH retiree and spouse is becoming more evident (and expensive) every day.

I do appreciate your efforts in explaining that current STRS healthcare rates aren't affordable. Finally, like you, I retired and went back to work. I work 12 hours shifts so that I can afford to have healthcare insurance, comparable to the STRS 80/20 plan, for a monthly premium that is far more affordable than the STRS plan for myself and I can also subsidize my wife's premiums while she is also working. We are lucky...many STRS retirees (not yet eligible for Medicare) either can't find a job (especially now - with the financial climate) or are too ill to work.

Ann, this letter may not sit too well with some of those 35 year retirees but..... they should understand that there is no decent retirement without affordable healthcare. This applies to both 30 and the 35 year retirees as the 30 year people and the 35 year people both retired with what STRS considers "full benefits." The healthcare premium rates for the 30 year and the 35 year retiree are the same.

Now.... maybe Karen can take some time out during her busy football season and tell me why she thinks my (and other tens of thousands of retirees with and without spouses) healthcare rates are still "affordable." You, Ann, have replied and have said they are "outrageous"...I thank you for stating this. I will be awaiting Karen's response.

John

From Ann Hanning, September 29, 2009Subject: RE: Ann...would you please pass this on to your Western Area Vice President, Karen Butt

John,

I’ve forwarded your message to Karen Butt. Karen is a big football fan & often busy during the season.

I agree with you that health care costs are outrageous & unsustainable. This is true not only for the STRS plan, but for those plans offered by others. $1,155 per month is unaffordable for many people. This is especially true when co-pays & deductibles are added to the costs. I’ve been sharing the 2010 premium chart in some of my presentations.

A school district in the Columbus area says the cost of family coverage (for as few as the employee & spouse - 2 people) is $1253 per month. The district pays a portion of the cost for the active employee.

Until 2 weeks ago, I was a “young spouse”. I celebrated my 65th birthday earlier this month, by going to Kroger for my “free” flu shot (paid by Medicare).

In 2003, I returned to work part-time so that I could pay for my STRS health care. At that time, we were also providing HC for a 20 year old son who was living at home & going to college. In 2005, I began working full-time. In 2006, we reduced our premiums by changing our HC with STRS to the Aetna basic plan. In 2008, we dropped the dental plan offered by STRS.

In the past 5 years, I have twice asked an independent insurance agent to seek less expensive HC for me. I was told that the STRS plan was my best choice in terms of cost & coverage. I was told that other HC providers had concerns about my high blood pressure & my height to weight ratio (I guess I’m too short to get less expensive HC !)

Recently my doctor wanted to change one of my two daily blood pressure medications which each cost $4 per month. He said I know you won’t take a higher cost medication so check at the pharmacy & if the prescription is not on the formulary, let me know & I’ll find another lower cost drug

When I mention the high cost of STRS spousal HC, some single benefit recipients (single, divorced & widowed) remind me that they do not want their rates & costs increased to provide less expensive HC for me & other non-career teachers.

As we continue to review the long term fiduciary & financial contingency planning by STRS, I’ve heard from some ORTA members. Some members have written to say preserve my health care, even if it means reducing my COLA. Some say that older retirees need a higher COLA, as their pension benefit is probably lower than that of younger retirees. Others say that those under the age of 65 years need a higher COLA to offset HC costs

When the pension systems presented their solvency plans to the ORSC (Ohio Retirement Study Council), Aristotle Hutras, the ORSC Director, stated that the

Pension systems were in trouble partly because they provided & subsidized retiree health care programs which are NOT required by state statute.

HPA (Healthcare & Pension Advocates), formerly, HCA (Health Care Advocates) continues to be concerned about the solvency of the STRS Health Care Stabilization Fund (HCSF). In a recent study requested by HPA, Bolton Partners suggest that efforts be focused on keeping the highest possible COLA for STRS benefit recipients, even at the expense of reducing health care! They noted that all benefit recipients receive a COLA; only those participating in the STRS HC plan receive the premium subsidy & benefit.

HB 315

HB 315 died on 12/31/08. Unless they are passed by the House & Senate, all bills introduced in a General Assembly die at the end of that GA period. When HCA met in January, we began talking to Rep. Oelslager about re-introducing the bill for this GA period (2009-2010). When we learned of concerns about the solvency of the STRS pension fund, HCA became HPA & changed its immediate focus. As noted above, HPA remains concerned about the solvency of the HCSF.

In conclusion, I agree that health care costs are high. We all need to continue efforts at all levels to address the health care issues & costs.

Monday, September 28, 2009

Wow.....this lady's either misinformed or quite well off!

John Curry to Ann Hanning, September 28, 2009

Subject: Ann...would you please pass this on to your Western Area Vice President, Karen Butt

Ann...Today I found the article below in the Bucyrus Telegraph Forum. Since Karen Butt's email is not listed on your ORTA site I am asking you to pass this email on to Karen. Also, while you are at it, would you please ask Karen how STRS can "keep health care affordable" when STRS currently wants $967 per month to keep this 30 year pre-Medicare age retiree and his spouse insured through STRS. Also ....ask her to comment on the cost next year (for the same coverage) that will cost $1,155 per month in premiums. Does she (or you, for that matter) consider this as "affordable?" Do either one of you consider a $1,155 dollar monthly premium "affordable?" Seriously.

John Curry

P.S. I've included the 2009/2010 STRS premium table at the end of this letter for your convenience.

GALION -- Thirty-eight members of the Crawford County Retired Teachers Association met June 15 at the Church of the Nazarene. President Tom Morton led the Pledge of Allegiance and prayer. Lunch was then served by church members.

Ethel Smith read a patriotic and religious poem for the devotional service.

Karen Butt, western area vice president of Ohio Retired Teachers Association (ORTA) presented updates about ORTA. House Bill 3156 has been put on hold. An area meeting is planned for April in Findlay. Two new teacher members were elected to ORTA. State Teachers Retirement System (STRS) was begun in 1920 and is working to keep health care affordable. Jim Miller, a national consultant, spoke at the ORTA meeting in May.

A representative of the Retired Senior Volunteer Program (RSVP) of Marion, Crawford and Morrow counties spoke about the RSVP program and provided brochures containing information about the program.

Morton called the business portion to order with a humorous poem. Frances Waines announced the money from the sale of her books went to toward the Bucyrus Pubic Library. Julia Heid distributed folders about consumer alerts and scams.

Get well cards for John Lazares

September 28, 2009

As if John hasn't had enough suffering with his knees, he's got more. In & out of the hospital in the past few days, home now. Sciatica (epidural), kidney stones & gallstones; stent moved & he developed an infection. If you'd like to send him a card, here's his address:

.....John Lazares.....8133 Devonshire Pl......Maineville, OH 45039

Info for newbies: John worked with Dennis Leone in 2003 to expose the flagrant mismanagement and misspending at STRS (we owe him MUCH!!!). He served on the STRS Board (active seat) 2004-2008 and plans to run for a retiree seat the next time there is a vacancy (he plans to retire by the end of the year).

Q. So...how many shares of B of A did we have when the news of the Merrill losses broke? A. More than 8 million!

From John Curry, September 28, 2009

When news of the Merrill losses broke, Bank of America shareholders lost more than $25 billion in market value. The Ohio Public Employees Retirement System held more than 10 million Bank of America shares when the merger was announced. The State Teachers Retirement of Ohio held more than 8 million shares.

Cordray said Ohio pension fund losses were in the “hundreds of millions,” ensuring its status as part of the lead plaintiff group. That involvement gives his office an ability to drive the litigation.

Ohio Attorney General Richard Cordray said he will push for monetary damages and changes in corporate governance in connection with a shareholder lawsuit involving Bank of America Corp.’s 2008 acquisition of Merrill Lynch.

Ohio is part of a lead plaintiff group that includes five pension funds in Ohio, Texas, Sweden and the Netherlands. The group filed an amended complaint in U.S. District Court in New York late Friday, claiming Bank of America and Merrill Lynch executives concealed massive losses prior to the merger and hid from shareholders a plan to pay up to $5.8 billion in bonuses for Merrill Lynch employees.

Spokesman Ted Hart said other members of the class have filed complaints in the case, but Friday's action represents the first complaint from the lead plaintiff group since it attained that status.

When news of the Merrill losses broke, Bank of America shareholders lost more than $25 billion in market value. The Ohio Public Employees Retirement System held more than 10 million Bank of America shares when the merger was announced. The State Teachers Retirement of Ohio held more than 8 million shares.

Cordray said Ohio pension fund losses were in the “hundreds of millions,” ensuring its status as part of the lead plaintiff group. That involvement gives his office an ability to drive the litigation.

“You can control the direction and pace of the lawsuit,” he said in a conference call Monday. “You have control over settlement discussions. We want to look as carefully as we can to figure out what changes in corporate structures might prevent these kinds of problems in the future.”

The complaint alleges that Bank of America agreed to let Merrill Lynch pay billions in year-end bonuses without disclosing that information to shareholders. And in the two months prior to a shareholder vote on the merger, executives from both companies were aware of “massive and highly material losses” that they also failed to disclose.

“They were concealing billions of dollars in losses with one hand and clearing the way for extravagant bonus payments with the other,” Cordray said in a statement. “This case gives the public pension funds and other shareholders a chance to stand up against Wall Street.”

Where does this greed end??

From John Curry, September 28, 2009Thank you, AG Cordray!!!!!!!!!!!!!!!!!Consolidated Amended Complaint Filed in Shareholder Lawsuit Against Bank of America

9/28/2009

(COLUMBUS, Ohio) – Ohio Attorney General Richard Cordray announced today that the Lead Plaintiff group in a securities class action lawsuit against Bank of America has filed a consolidated amended complaint. The complaint alleges that statements made in 2008 by Defendants regarding the Bank of America merger with Merrill Lynch failed to disclose billions of dollars in known losses at Merrill Lynch and Bank of America and billions more in accelerated agreed-upon bonuses to be paid to Merrill Lynch executives and employees.

“They were concealing billions of dollars in losses with one hand and clearing the way for extravagant bonus payments with the other,” said Attorney General Cordray. “This case gives the public pension funds and other shareholders a chance to stand up against Wall Street.”

The Lead Plaintiff group includes: the State Teachers Retirement System of Ohio; the Ohio Public Employees Retirement System; the Teacher Retirement System of Texas; Stichting Pensioenfonds Zorg en Welzijn, represented by PGGM Vermogensbeheer B.V.; and Fjärde AP-Fonden.

The lawsuit alleges that Bank of America, during merger negotiations, agreed to allow Merrill Lynch to pay up to $5.8 billion in discretionary year-end bonuses to its executives and employees, but failed to disclose that material information important to shareholders.

Additionally, in the two months just prior to the shareholder vote on the merger, Merrill Lynch suffered billions in losses. The complaint alleges that senior executives at both Merrill Lynch and Bank of America were aware of these massive and highly material losses but did not disclose the information to investors prior to the vote.

Even after the shareholder vote, according to the complaint, the Defendants continued to conceal highly material information from investors and knowingly made false and misleading public statements through press releases, investor calls, interviews and speeches. Not until the end of the class period, did the Defendants disclose the losses and bonus payments. Indeed, as alleged in the complaint, former Merrill Lynch CEO John Thain recently asserted that Bank of America agreed to these bonus payments and their acceleration, and if the bank stated to the contrary, it was “lying.”

The merger closed on January 1, 2009. Later that month, when the investment community learned of the billions in losses and bonus payments, Bank of America shares lost more than half their value. The New York Times described it as “one of the greatest destructions of shareholder value in financial history.”

Bob Stein and John Curry re: Bonus issue

From John Curry, September 28, 2009Subject: Stein to Curry. re. bonus issue

Bob,

Thank you for your prompt reply.

From Bob Stein, September 27, 2009Subject: Re: Bob...a campaign promise...you would vote against the bonus plan but you would vote FOR paying the associated bonuses?

John

I don't know for a fact that anyone threatened anything. I won't speak for others and I think that presuming that threats were made could create a misunderstanding that might give unfair impressions. That could be more problems. There was a case in the past that I thought was similar. The case is public record and Kathie had it on her blog a few days ago. The total cost to STRS was a significant multiple of the value in dispute. Given that observation, combined with much of what was said by others in public session, I did not see a benefit sufficient to compensate for the risk of voting "no" on last year's PBIs.

I'm still doing what I said I wanted to do on the web page you cited, my statement in the April 2009 STRS newsletter, and in all but my earliest campaign literature. I looked. The only thing that has changed since that web page was written is that the 2009 PBI plan was replaced with a 2010 PBI plan that addressed some of the return measurement issues. The processes that created a 2009 plan that was apparently not well enough understood by the membership have not been completely addressed -- but those processes were not part of the PBI motion. The misunderstanding about the 2009 PBI plan also might be as simple as a collection of oversights by the membership -- not realizing that the stock market could go down or that STRS had exposure in that area. Knowing that, how many people have read the entire 2010 PBI plan? Are we setting ourselves up again?

Another interesting current oversight might be revealed by comparing the audio record of the PBI discussion at the Sept regular board meeting with the statements you noted on my web site. The prepared comments of even those who voted "no" on the past PBIs are consistent with almost everything on my web site, most of what I wrote into my statement (which I didn't read at the board meeting), and nearly everything I find reasonable on the topic. You can also see this clearly in comparing Ms. Ramser's public comments with those of Mr. Brooks and Mr. McGreevy. The distinction between a "no" and "yes" vote looks primarily like a difference in degree and time frame rather than a difference in fundamental values. Nobody took this lightly and everyone made the choice that had the highest probability of a decent outcome for STRS in their best judgment. That's why there are multiple board members.

With regard to my lack of public comment after the vote -- for the reasonable future, I will take the "required to be kept confidential by Ohio law" statements read at the beginning of executive sessions more literally than some. Perhaps I will outgrow that but would rather be too strict than expose STRS to loss with an incorrect judgment about what I can say in public. You will note that nothing I've said here references anything outside public knowledge. I plan to err on the side of caution. My charge is to be a fiduciary to STRS and its future not to be a communicator after the fact. Nasty emails and phone calls make me feel bad but are a price that I'm willing to pay if there is a potential to save STRS some money or saves the board time that it could spend on productive issues.

Looking back, I probably should have read my prepared comments into the public session. Maybe I should have abstained from the vote because the 2009 and 2010 PBI plans were both in place before I took my seat. It is fortunate that those two omissions resulted in people reacting against me but will have no effect on the implemented policy.

About Me

A graduate of the Oberlin Conservatory of Music and the Baylor University School of Music, I am a professional symphony musician by background. I am also a retired elementary classroom teacher (nonmusic), having taught in the Alliance (OH) City Schools 2-1/2 years and the Columbus Public Schools 30 years. My first job was as harp instructor at The University of Texas; currently I am a Lecturer in Harp at The University of Mount Union. As a retired educator and a life member of a number of professional organizations, including the Ohio Retired Teachers Association and the Ohio Education Association-Retired, I also worked through CORE (Concerned Ohio Retired Educators, which officially disbanded 9/20/12) to help bring about badly needed reform in our teachers retirement system, STRS Ohio. My e-mail: kbb47@aol.com.